* Italian 10-year bond yields rise to seven-week high
* BTP/Bund spread at two-week high
* Analysts cite government infighting, upcoming ratings review (Adds Cyprus syndication plan, updates prices)
By Dhara Ranasinghe
LONDON, April 23 (Reuters) - Italy's 10-year government bond yield jumped to its highest in seven weeks on Tuesday, pushed up by unease over government infighting and an upcoming ratings review.
Analysts stressed that trading in bond markets remained thin following the Easter holiday, exaggerating price moves. A rise in oil prices to 2019 highs also put upward pressure on euro zone yields generally.
Italy's 10-year bond yield soared 10 basis points to 2.70 percent -- its highest since early March. That pushed the Italian/German yield gap to its widest since late February at almost 265 bps.
Ratings agency S&P Global is due to review Italy's credit rating this Friday. It rates Italy BBB, two notches above junk, but has a negative outlook on the country.
Italy's weak economy and concern about a growing budget deficit have raised worries about Italy's ratings outlook.
Public debt in Greece and Italy, the two most indebted countries in the euro zone, grew last year while the bloc as a whole saw its liabilities decrease, the European Union statistics office said on Tuesday.
"I'm not expecting a change in the ratings, but there is some nervousness in the markets," said Pooja Kumra, European rates strategist at TD Securities in London. "Also, there has been heightened disputes within the government and general weakness in the EGB (European government bond) space, which is not helping."
Italy's deputy prime minister and far-right League leader, Matteo Salvini, attempted to soothe the worries, saying the government was not at risk and the cabinet would approve a decree on Tuesday to boost economic growth.
Italy's coalition partners had clashed on Friday over mutual allegations of corruption. Relations between the League and 5-Star Movement are considered at their lowest since the two formed a government last May.
"Uncertainty is weighing on BTPs and some investors have argued to us that early elections would be welcome," said Richard McGuire, head of rates strategist at Rabobank.
The selloff in Italian bonds, also known as BTPs, weighed on banks -- large holders of domestic debt. Italy's index of bank shares fell 1.7 percent.
The cost of insuring exposure to Italian debt for a period of five years via credit default swaps rose to 196 basis points, the highest since April 11, according to IHS Markit.
Outside Italy, other southern European government bond yields rose 3 to 4 basis points while better-rated "core" euro zone bond yields were up 2 to 3 bps as rising oil prices lifted inflation expectations.
Brent crude prices reached to their highest this year after the United States tightened sanctions on Iran.
The five-year, five-year forward, a measure of long-term inflation expectations tracked by the European Central Bank, rose to a one-month of 1.42 percent. It had dropped this year as investors reassessed the outlook for a weaker economy and the ECB's scope to lift interest rates.
Germany's benchmark 10-year bond yield rose 2.5 bps to 0.049 percent, roughly five bps below last week's four-week highs.
Yet, these yields are still hovering near some of their lowest levels in several months, and demand for bonds remains extremely strong.
This is set to be tested in the near future with Cyprus appointing banks for a syndicated bond sale of debt maturing in December 2024 and May 2049.
Reporting by Dhara Ranasinghe; Editing by Alison Williams